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March 16, 2023 HB 23-1228
Legislative Council Staff
Nonpartisan Services for Colorado’s Legislature
Fiscal Note
Drafting Number:
Prime Sponsors:
LLS 23-0700
Rep. McCluskie; Willford
Sen. Zenzinger
Date:
Bill Status:
Fiscal Analyst:
March 16, 2023
House Public & Behavioral Health
Kristine McLaughlin | 303-866-4776
kristine.mclaughlin@coleg.gov
Bill Topic: NURSING FACILITY REIMBURSEMENT RATE SETTING
Summary of
Fiscal Impact:
☒ State Revenue
☒ State Expenditure
☐ State Transfer
☐ TABOR Refund
☐ Local Government
☐ Statutory Public Entity
The bill makes several changes to the Medicaid nursing facility reimbursement rate
setting process. The bill increases state revenue and expenditures on an ongoing
basis.
Appropriation
Summary:
For FY 2023-24, the bill requires an appropriation of $62,264,197 to the Department
of Health Care Policy and Financing
Fiscal Note
Status:
The fiscal note reflects the introduced bill.
Table 1
State Fiscal Impacts Under HB 23-1228
Budget Year
FY 2023-24
Out Year
FY 2024-25
Out Year
FY 2025-26
Revenue Cash Funds $555,831 $572,506 $454,733
Total Revenue $555,831 $572,506 $454,733
Expenditures General Fund $30,509,457 $34,475,152 $29,866,943
Federal Funds $31,754,740 $34,475,152 $29,866,942
Total Expenditures $62,264,197 $68,950,304 $59,733,885
Transfer - - -
Other Budget Impacts General Fund Reserve $4,576,419 $5,171,273 $4,480,041
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March 16, 2023 HB 23-1228
Summary of Legislation
The bill makes several changes to the Medicaid nursing facility core per diem reimbursement rates
and the Medicaid nursing facility supplemental payments. It also requires an independent accountant
to annually audit facilities’ financial statements. It repeals the requirement that HCPF exempt certain
facilities from the provider fee effective July 1, 2026.
Core per diem reimbursement rates. Under current law, the reimbursement rate increases by
3 percent annually. The bill repeals this requirement, and instead requires the rate to increase as
follows:
10 percent in FY 2023-24;
3 percent in FY 2024-25;
1.5 percent in FY 2025-26; and
by a rate determined by HCPF in subsequent years.
HCPF must report annually to the Joint Budget Committee on its plan for further rate increases, and
it must remove Medicare costs from the provider rate setting by July 1, 2026.
Supplemental payments. The bill establishes a minimum nursing facility supplemental payment rate
of $2 per patient per day in FY 2023-24, and requires HCPF to adjust the rate annually. The bill creates
a new supplemental payment for facilities with disproportionately high Medicaid utilization, that are
geographically critical to ensuring access to care, and that admit individuals who have been
compassionately released from the Department of Corrections.
State Revenue
Raising the reimbursement rate increases state revenue to the Central Fund for Veterans Community
Living Centers (VCLCs), which are operated by the Department of Human Services, by the amounts
shown in Table 2. Allowing HCPF to collect a provider fee from more facilities may increase state
revenue to HCPF. These impacts are detailed further below.
Table 2
Revenue Under HB 23-1228
VCLC Facility FY 2023-24 FY 2024-25 FY 2025-26
Fitzsimons $47,722 $49,153 $39,042
Florence $239,968 $247,167 $196,322
Homelake $119,026 $122,597 $97,377
Rifle $149,114 $153,588 $121,993
Total $555,831 $572,506 $454,733
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March 16, 2023 HB 23-1228
Department of Human Services. The Department of Human Services owns and operates
four Veterans Community Living Centers that receive reimbursement payments from HCPF. Based
on the current rates for the four facilities, and the currently mandated 3 percent annual rate increase,
the new requirements are expected to have the revenue impact detailed in Table 2. Revenue may vary
from this estimate due to varying payment timelines. This revenue is not subject to TABOR.
Department of Health Care Policy and Financing. HCPF may collect more revenue in nursing facility
provider fees starting July 1, 2026. Any changes will be accounted for through the annual budget
process.
State Expenditures
The bill increases state expenditures in HCPF by $62.3 million in FY 2023-24, $69.0 million in
FY 2024-25, and $59.7 million in FY 2025-26. Costs are shared, roughly equally, between the General
Fund and federal funds. Expenditures are shown in Table 3 and detailed below.
Table 3
Expenditures Under HB 23-1228
FY 2023-24 FY 2024-25 FY 2025-26
Department of Health Care Policy and Financing
Core Per Diem Rate Increase Impact $42,941,017 $48,901,099 $39,684,680
New Supplemental Payment Cost $19,323,180 $20,049,205 $20,049,205
Total $62,264,197 $68,950,304 $59,733,885
Changes to Core Per Diem Rate
Core per diem rate increase. Under current law, the nursing facility core per diem rate increases by
3 percent annually. Under the new requirements, accounting for annual compounding and timing of
payments, the net increase is about 6 percent in FY 2023-24, 7 percent in FY 2024-25, and 5 percent in
FY 2025-26.
Medicare cost adjustment. Currently, nursing facilities can report costs that have already been
reimbursed by Medicare for Medicaid reimbursement. The bill requires HCPF to remove these costs
from the rate calculation by July 1, 2026. However, due to complications from funding sources,
nursing facilities are not currently being reimbursed for their full costs. Thus, this reduction in
reimbursement eligible costs is not expected to result in a lower total payment.
Rate growth plan. HCPF can absorb the costs of engaging with stakeholders to develop a rate growth
plan and produce the corresponding reports. Any appropriations necessary for further development
or plan implementation will be requested through the annual budget process.
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March 16, 2023 HB 23-1228
Changes to Supplemental Payments
New supplemental payment cost. Approximately 9,000 Medicaid clients reside in nursing facilities
with 85 percent or more Medicaid clients. Under the new supplemental payment, it is assumed that
these facilities will be eligible for an additional $10 per client per day. Approximately 4,000 Medicaid
clients reside in nursing facilities with between 75 percent and 85 percent Medicaid clients. Under the
new supplemental payment, it is assumed that these facilities will be eligible for an additional $5 per
client per day.
It is assumed that facilities will only be eligible for one additional payment regardless of how many
criteria for the supplemental payment they meet. It is further assumed that most of the facilities that
are geographically critical or admit individuals who have been compassionately released, have a
disproportionately high Medicaid utilization. The state share of this new supplemental payment will
be funded through the General Fund instead of through provider fees.
Current supplemental payment minimum rate and annual adjustment. Workload in HCPF will
minimally increase to recalculate the current supplemental payment as a per patient per day payment.
If the current supplemental payment is lower than $2 per patient at qualifying facilities per day, this
will not impact the total amount paid because HCPF is required to fund this payment from a set
nursing facility provider fee (and the corresponding federal match) and this fund is at capacity.
Payments may shift between providers are a result of the new requirement.
Wage-based supplemental payment repeal. The bill repeals the wage based supplemental payment
effective July 1, 2026. It is assumed that HCPF still has the authority to make the payment through
the Long Bill appropriation.
Other Changes
Facility audit. It is assumed that the nursing facilities will incur the costs of an independent
accountant to annually audit their financial statements.
Provider fee exemption repeal. This provider fee exemption repeal may result in increased revenue
as discussed in the revenue section. If it does, the will result in increased payments to nursing facilities
as the current revenue is not sufficient to cover nursing facility costs.
Effective Date
The bill takes effect upon signature of the Governor, or upon becoming law without his signature.
State Appropriations
For FY 2023-24, the bill requires an appropriation of $62,264,197 to the Department of Health Care
Policy and Financing. Of this amount, $30,509,457 is from the General Fund and $31,754,740 is from
federal funds. Page 5
March 16, 2023 HB 23-1228
State and Local Government Contacts
Health Care Policy and Financing Human Services Information Technology
Public Health and Environment Law
The revenue and expenditure impacts in this fiscal note represent changes from current law under the bill for each
fiscal year. For additional information about fiscal notes, please visit: leg.colorado.gov/fiscalnotes.